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$80,000 + a Year
Old 02-03-2006, 02:26 PM   #1
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$80,000 + a Year

Hello everybody! For those of you that have already reached retirement, I wanted to ask some advice of you.

I have a business that will produce $80,000 + a year in total profit, and basicaly runs itself without requiring to much of my time. here is the plan I have in place. I am going to get a job (dosen't have to pay a whole lot since we are debt free with the exception of our $900 a month mortgage payment) and I will place the $80,000 + profit from my business into retirement accounts, here is my question.

I am looking at investing into Roth IRS's and SEP fund, if I continue to place this same amount of money into these accounts each year, it looks like I will be able to retire in 5-6 years while drawing $40K out each year. With compound interest, I should have about $850K-$900K in these accounts. Am I looking at the correctly? Let me hear your suggestions. God Bless
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Re: $80,000 + a Year
Old 02-03-2006, 03:00 PM   #2
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Re: $80,000 + a Year

I just have to point out the spam detector is twitching on this one; this being your first post and baiting with an $80k/year business that requires so little attention a regular job is feasible. However, I will answer as if you're legitimate until the plot unfolds: EDITed (after thread is well into page 2): Okay, no spam so far an no remaining seque into spam.

There are limits on Roth and SEP contributions; are you proposing to build $900k in tax-deferred accounts in 6 years? I don't think you can do that, but you could save in after-tax accounts that much. Also, interest doesn't compound that much over 6 years of contributions. Perhaps you already have a nest egg?

Also, is the business not sustainable that you could just live off $40k of its income and save the other $40k until you have enough, and then sell the business?

EDIT: Struck out and added to first paragraph after seeing it's apparently not spam.
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Re: $80,000 + a Year
Old 02-03-2006, 03:15 PM   #3
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Re: $80,000 + a Year

Quote:
Originally Posted by BigMoneyJim
...are you proposing to build $900k in tax-deferred accounts in 6 years? I don't think you can do that...
Actually, there are ways of doing that, but this guy doesn't sound like he's sophisticated enough to know how.

I'd like to get advice from him about how he managed to set up a business that makes $80K a year that runs itself without much of his time. I've seen these kinds of businesses firsthand, so I know they exist, but it would be nice to hear more about his.

I think he could offer this group just as much as we could offer him, so let's hear it.
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Re: $80,000 + a Year
Old 02-03-2006, 03:18 PM   #4
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Re: $80,000 + a Year

Quote:
Originally Posted by retire@40


I'd like to get advice from him about how he managed to set up a business that makes $80K a year that runs itself without much of his time.* I've seen these kinds of businesses firsthand, so I know they exist, but it would be nice to hear more about his.
I'll bite on that as well.
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Re: $80,000 + a Year
Old 02-03-2006, 03:39 PM   #5
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Re: $80,000 + a Year

what's the "scoop", steve? Please don't tell me Avon.
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Re: $80,000 + a Year
Old 02-03-2006, 04:17 PM   #6
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Re: $80,000 + a Year

thanks for the reply. My business indeed is legit and this is not spam. I have a safety supply company and I provide protective clothing for the US Government/Nuclear Sector. I have a very LARGE customer that I have been doing business with for 7+ years and is very loyal. I have worked hard to establish trust, quality products, and on-time delivery.

My plan was in the event something were to go wrong and the business went away after 5-6 years, I would have socked enough away to retire however, if the business continues after said time-frame indeed I will continue in it. The reason I do not want to pull from the business for living income is because it will deminish the amount I can invest thus, prolonging the time it will take to aquire said funds.
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Re: $80,000 + a Year
Old 02-03-2006, 04:18 PM   #7
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Re: $80,000 + a Year

Any relation to 'scubasteve'?
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Re: $80,000 + a Year
Old 02-03-2006, 05:09 PM   #8
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Re: $80,000 + a Year

Quote:
Originally Posted by scoopsteve
I have a safety supply company and I provide protective clothing for the US Government/Nuclear Sector.
Welcome to the board, Steve.

Ya know, my shipmates and I fantasized for years what we'd do if we had the opportunity to provide a little "customer feedback" to the company that manufactured the submarine force's anti-contamination clothing. There was no doubt in anyone's mind that a whole lot of money was being made by the lowest bidder.

But, hey, maybe that was just the bureaucracy imposed on us by the Navy's Nuclear Reactors office.
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Re: $80,000 + a Year
Old 02-03-2006, 05:11 PM   #9
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Re: $80,000 + a Year

I would like to hear how you are going to build 80k a year for 6 years into 900k.
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Re: $80,000 + a Year
Old 02-03-2006, 06:04 PM   #10
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Re: $80,000 + a Year

Here is how you do it with compounding interest. Typically your money will double for you after 7 years, so online those lines here is how it should work using that scale:

Year 1 $80,000= $160,000 year 7
Year 2 $80,000= $145,000 year 6
Year 3 $80,000= $125,000 year 5
Year 4 $80,000= $115,000 year 4
Year 5 $80,000= $105,000 year 3
Year 6 $80,000= $95,000 year 2
Year 7 $80,000= $85,000 year 1

This formula is putting equal amounts of 80K in each year.
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Re: $80,000 + a Year
Old 02-03-2006, 06:06 PM   #11
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Re: $80,000 + a Year

560K Principal = 830K Principal + Interest in 7Years
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Re: $80,000 + a Year
Old 02-03-2006, 06:10 PM   #12
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Re: $80,000 + a Year

Quote:
Originally Posted by scoopsteve
Here is how you do it with compounding interest. Typically your money will double for you after 7 years, so online those lines here is how it should work using that scale:

Year 1 $80,000= $160,000 year 7
Year 2 $80,000= $145,000 year 6
Year 3 $80,000= $125,000 year 5
Year 4 $80,000= $115,000 year 4
Year 5 $80,000= $105,000 year 3
Year 6 $80,000= $95,000 year 2
Year 7 $80,000= $85,000 year 1

This formula is putting equal amounts of 80K in each year.
Maybe I'm missing something, but I think your are expecting north of 10% per year.
If so, what are you basing that return on?
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Re: $80,000 + a Year
Old 02-03-2006, 06:15 PM   #13
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Re: $80,000 + a Year

agressive investments
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Re: $80,000 + a Year
Old 02-03-2006, 07:40 PM   #14
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Re: $80,000 + a Year

Sure. Beat inflation by 10% for seven years, and contribute 80000/yr. My calculations say you'll have about $830k by the end of year seven.


Good luck getting inflation+10% a year though. However, if you assume inflation+7% returns, you're talking closer to eight years. As long as you understand it could be a year or two more than you think till you can reach your magic number if your assumed return is wrong.
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Re: $80,000 + a Year
Old 02-03-2006, 08:07 PM   #15
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Re: $80,000 + a Year

Quote:
Originally Posted by scoopsteve
agressive investments
But of course, what else are there? At least you changed your 5-6 year timeline after explaining compound interest to the group
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Re: $80,000 + a Year
Old 02-03-2006, 08:27 PM   #16
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Re: $80,000 + a Year

C'mon guys, cut scoopsteve a little slack.

I'll admit to being suspicious of his first post, but after explaining his company, he could be on the up-and-up. Let's give him the benefit of the doubt.

In his OP he did ask what we thought and for suggestions, but I'm not sure he was expecting Nords to complain about having to wear lead-lined underwear. I agree that his expectation of 10%+ returns for 5-6 (7?) years is optimistic, but he did ask nice.

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Re: $80,000 + a Year
Old 02-03-2006, 08:35 PM   #17
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Re: $80,000 + a Year

Quote:
Originally Posted by scoopsteve
Typically your money will double for you after 7 years
Uhm... good luck with that 10%+ APY return, Steve. *I think you've been led astray by someone projecting history into the future without accounting for the difficulty of making the future grow at a much higher rate than the entire 20th century (not just the last 15 or 20 years).

Let's talk compounding! *If you're planning to double your money every 7 years, the APY works out to:
[(FV/PV)^^(1/n)]-1 = [(double)^^(1/7)]-1= 10.41%. *
Or the Rule of 72 will give you 10.29%. *Close enough, but not if you're planning to do this in just 7 years. *Better stick with 10.41%.

The future value of your seven-year series of $80K payments at 10.41% gives
FV=PMT*{[(1+i%)^^n-1]/i%} = $80K*{[((1+.1041)^^7)-1]/.1041}=$768K.

For you to compound to $850K you'd need to raise those annual contributions to ~$88,476 or achieve an after-tax return of a bit more than 13.65%. *Or be willing to work the business most of an eighth year at "only" 10.41%.

Speaking as an aggressive investor myself, can you be more specific on where you anticipate getting that kind of boost for your money every year for the next seven? *And have you looked at the range of standard deviations of volatility that you're going to experience out at the bleeding edge of the return/volatility curve? *We're all working our own ER portfolios and expecting an equity risk premium more like 5%, so for you to double that return with "aggressive investments" would be a very impressive accomplishment indeed.

Quote:
Originally Posted by REWahoo!
C'mon guys, cut scoopsteve a little slack.

I'll admit to being suspicious of his first post, but after explaining his company, he could be on the up-and-up.* Let's give him the benefit of the doubt.*

In his OP he did ask what we thought and for suggestions, but I'm not sure he was expecting Nords to complain about having to wear lead-lined underwear.
Spoken like a blissfully-ignorant guy who never had to wear full (or even double!) anti-Cs.

Let's just start with this image of what you feel like even before spending a couple hours poking around a 100 degrees F reactor compartment looking for "surprises":
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File Type: jpg Big Bird.jpg (1.5 KB, 175 views)
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Re: $80,000 + a Year
Old 02-03-2006, 08:48 PM   #18
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Re: $80,000 + a Year

Quote:
Originally Posted by Nords
Spoken like a blissfully-ignorant guy...
I have no idea of what you're talking about. I'm just enjoyin' life...

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Re: $80,000 + a Year
Old 02-03-2006, 09:07 PM   #19
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Re: $80,000 + a Year

Quote:
Originally Posted by REWahoo!
I have no idea of what you're talking about.
Well, I'll be darned. I never thought Naval Reactors would let these slip by a Google Image search!
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File Type: jpg Anti-Cs.jpg (3.9 KB, 166 views)
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Re: $80,000 + a Year
Old 02-03-2006, 09:22 PM   #20
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Re: $80,000 + a Year

Quote:
Originally Posted by REWahoo!
I have no idea of what you're talking about.* I'm just enjoyin' life...

Hey, don't worry about it.* Nords has called me "Blissfully Ignorant" also.

I think he likes us.

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